Kenya seeks ‘modern mining act’ within three months

Kenya’s government lays out strategy and timeline for a new mining act, in a bid to deepen the natural resource sector in east Africa’s biggest economy

Kenya might have avoided the ‘resource curse’ which has afflicted many of its African peers, but the government has huge public spending plans and needs revenues to realise them. Resources are set to play an important role.

The oil and gas sector has already started opening up, with Tullow Oil handing over $6.3m in taxes last year and spending over $28m on local suppliers for its promising exploration work. The mining sector is next, as the government scraps a 1940s-era mining code drafted by the British colonisers, and aims to pass a new act within 3 months to attract investment.

“We have an old mining code which is giving power to an individual rather than to a process, and the process is first come first served, which is ridiculous because there is no transparent mechanism [for allocation],” says Najib Balala, cabinet secretary for Mining – a newly created position, as Kenya has never had a mining minister post before. “Before, the commissioner of mines and geology had any power, any time”.

Mr Balala believes Kenya likely has the same natural resource potential as its neighbours. “We have not done a proper airborne survey,” he explains. “We don’t know what we have. We rely on the old mines of 1940s, from the British time. Every day we are realising our neighbours have quite a number of resources, why not Kenya? We share the same greenstone belt, the Mozambique belt.”

Momentum behind a new mining act began with the previous government, but they were slow to act, complains Mr Balala. “They announced 2 years ago they have legislation for publication. We come in, it has not been done. I’ve made it my personal determination that within three months I will get it done.”

Kenya’s new government – led by Uhuru Kenyatta – has made waves in the business community for their reportedly no-nonsense, pro-business approach. Their political agenda is ambitious. “We have a new constitution that has changed the entire system of government, then we have legislation that is changing the departmental legislation of the mining sector,” says Mr Balala.

Growth in natural resources could deliver the kinds of quick revenues which could help government tackle critical public goods deficits, especially in infrastructure. Despite a decentralisation agenda in the new constitution, the new draft mining act will still see 75 percent of mining tax revenues go to central government for the “bigger agenda”, says Mr Balala, with 20 percent going to county governments, and 5 percent to communities directly affected with the mine.

While acknowledging the government’s need for this money, Mr Balala emphasises a gradual, consultative approach. “We have an 18-month transition, and I am going to create a window of dialogue. If you are an existing company, here for a long time, you have big issues, or you have different contracts with government, bring them on the table. Let’s look at them.”

He adds that reforms will bring stability and limit the discretionary powers of government. “We will know how many years before we review royalties, and not change the rules of the game in mid-stream,” he pledges.

The new mining act is currently in cabinet, due for approval in the next two weeks, Mr Balala says, and it will be taken to parliament ‘within 3 months’. By early November, he hopes legislation will be in place, to take effect in July 2014.  But as Mr Balala notes, previous attempts to pass such a ruling have been stymied in the past, and it remains to be seen what impact the ongoing International Criminal Court investigation in Uhuru Kenyatta, the new president, could have on the government’s priorities.